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Reward vs. cashback credit cards: which offer the best deal?

Reward vs. cashback credit cards: which offer the best deal?
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Around six out of ten people with credit cards pay them off in full each month; for these people, reward and cashback credit cards could be attractive. Such credit cards provide the opportunity to gain benefits, either in cash or vouchers, when used at a variety of retailers.

Finding the best credit card can, of course, be challenging. The suitability of either a cashback or reward credit card can be considered based on their simplicity and value, as well as an individual’s personal circumstances.

Keeping it simple

For consumers seeking the simplest means to be rewarded for using their credit card, a cashback card could be the best option.

Cards such as the American Express Platinum Cashback Everyday Card offer cashback on all purchases, with the accumulated amount being deducted from a monthly statement around the anniversary of when the account was opened. For example, the American Express Platinum Cashback Everyday Card case has tiered cashback rates: at the time of writing, 0.5% cashback is earned on annual spending up to £5,000, and 1% above that level. 

A reward card, when used at certain retailers, allows an individual to accumulate points. These points are turned into vouchers that can then be spent at specific stores. This leaves the potential for an individual to fail to spend vouchers or to lose track of where the card needs to be used in order to accumulate points, which could mean they fail to maximise their rewards. 

Assessed on the basis of simplicity, therefore, a cashback card may be a more hassle-free means of maximising the benefits of credit card usage compared with using a reward card.

Consider the value

While it is straightforward to calculate the value of using a cashback card, reward cards can be more complicated: working out how much each point that is accumulated on a reward card is worth can prove challenging.

For example, some reward cards may offer 1 point for every £1 spent, with each 500 points equating to a £5 voucher. Other cards may offer 5 points for every £1 spent, and to receive a voucher for £5 an individual may need to accumulate 2,500 points. Although it takes the same amount of spending to receive a £5 voucher under each scenario, an individual will need to work out each card’s points value in order to assess which one is more appealing.

Comparing the value of different reward cards is made more difficult by the fact that for some cards the number of points earned depends on where the card is used. Other cards may also offer vouchers with larger values at specific stores, which can make it increasingly difficult to ascertain their value versus that of other reward cards.

And then there’s your personal circumstances

Whether a cashback or reward card is better also depends on personal circumstances. For consumers who lack the time to research reward cards, a cashback card could be the simplest means of benefitting from spending on a credit card.

For consumers who have the capacity to undertake research, comparing a number of reward cards may be worthwhile. Research may show someone that greater rewards can be obtained from frequent shopping at specific retailers where points are either accumulated more quickly or the vouchers paid out are for a higher value.

And the verdict is…

For the approximately 60% of consumers who pay off their credit card balance in full each month, either a cashback card or reward card could be a sound means of being rewarded for using a credit card.

Pay 0% interest on new purchases and balance transfers for 22 months – and earn reward points every time you shop!

The M&S Shopping Plus Credit Card* offers shoppers a 22-month 0% interest period on both new purchases and balance transfers. Not only that but you can also earn retail reward points every time you spend – whether in store at M&S, or elsewhere.  21.9% representative APR (variable)

*Affiliate Partner.

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